What would most effectively describe the risk of incorrect acceptance in terms of substantive audit testing?
Correct answer: A. The auditor has ascertained that the balance is materially correct when in actual fact it is not
- A. The auditor has ascertained that the balance is materially correct when in actual fact it is not
- B. The auditor concludes the balance is materially misstated when in actual fact is not
- C. The auditor has rejected an item from sample which was not supported by documentary evidence
- D. He applies random sampling on data which is inaccurate and inconsistent
Explanation
Incorrect acceptance occurs when the auditor accepts a materially misstated balance as materially correct. Option b describes incorrect rejection, while the other choices do not define this sampling risk.
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About Auditing
Auditing examines accounting records and financial statements to determine whether they present a reliable and fairly stated position. The subject covers audit objectives, internal controls, audit evidence, materiality, vouching, verification, working papers, auditor independence, audit reports, and the distinction between an audit and accounting or investigation.
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